HRA (House Rent Allowance) exemption is one of the biggest tax-saving opportunities for salaried employees who live in rented accommodation. But claiming it incorrectly is one of the most common tax errors. Here's everything you need to know.
The Three-Condition Formula
Your HRA exemption is the minimum of these three amounts:
Condition 1: Actual HRA received from employer
Condition 2: 50% of basic salary (if metro) or 40% of basic salary (if non-metro)
HRA Exemption = Min(3,00,000; 2,40,000; 1,80,000) = ₹1,80,000
Metro vs Non-Metro Cities for HRA
Under the Income Tax Act, only four cities are classified as "metro" for HRA purposes:
Delhi (including NCR — Gurgaon, Noida, Faridabad)
Mumbai (including Thane, Navi Mumbai)
Chennai
Kolkata
Important: Bangalore, Pune, Hyderabad, and Ahmedabad are NOT metro cities for HRA despite being major economic hubs. The non-metro 40% rate applies there.
Documents Required to Claim HRA
Rent receipts (rent amount, date, landlord name and signature, property address)
Rent agreement (lease/licence agreement)
Landlord's PAN — mandatory if annual rent exceeds ₹1,00,000 (₹8,333/month)
Can I Claim HRA Without Submitting to Employer?
If your employer doesn't capture HRA details and includes full HRA in TDS, you can still claim HRA exemption directly in your ITR. The ITR form has fields for this. However, you may get a TDS mismatch notice — keep your documents ready.
HRA When Both Spouses Work
Either one spouse can claim HRA if only one's name is on the rent agreement. If both work and rent is high, the higher-earning spouse should claim HRA (more beneficial due to higher tax bracket). Both cannot claim HRA for the same rent simultaneously.
⚠️ HRA is ONLY available in the Old Tax Regime. If you've opted for the New Tax Regime, you cannot claim HRA exemption — even if you're paying high rent.
FAQs
No. You cannot claim HRA for rent paid to your spouse — the Income Tax Act does not recognise this arrangement as a genuine landlord-tenant relationship, even if a rent agreement exists.
If you own and live in your house, you cannot claim HRA exemption. The entire HRA received becomes taxable. Similarly, employer-provided housing means no HRA exemption.
Yes. Delhi is one of the 4 official metro cities under the Income Tax Act. The 50% HRA cap applies to employees in Delhi and the entire NCR — Gurgaon, Noida, Faridabad, Ghaziabad.
Yes. Kolkata is one of the 4 official metro cities. Kolkata employees can claim up to 50% of Basic Salary as HRA exemption.
Yes. Mumbai is metro for HRA. The 50% cap applies to employees in Mumbai, Navi Mumbai, and Thane.
Yes. Chennai is one of the 4 official metro cities. Chennai employees can claim up to 50% of Basic Salary as HRA exemption.
No. Hyderabad is NOT a metro for HRA. Despite being a major IT hub, Hyderabad employees are capped at 40% of Basic Salary — not 50%.
Yes. Gurgaon (Gurugram) is part of Delhi NCR and qualifies for the 50% metro HRA cap. Same applies to Noida, Faridabad, and Ghaziabad.
No. HRA exemption is only available under the old tax regime. If you opted for the new regime in FY 2026-27, HRA exemption is not available regardless of rent paid.